1. Mgt Project Portfolio Management and the PMO Module 4 – The Link to Strategy/ Strategic Alignment
Dr. Alan C. Maltz
Howe School of Technology Management
Stevens Institute of Technology
© Alan C. Maltz, Ph.D, 2014

2. Organizational Strategy..
The plan of goals, policies, and actions that provide the overall direction and focus of the organization (PMI, p.7)
© Alan C. Maltz, Ph.D, 2014

3. Portfolio / strategic alignment
The goal to maximize the value of the portfolio is meaningless unless value is measured in terms of a company goal and that goal is articulated as part of your strategy
© Alan C. Maltz, Ph.D, 2014

4. The success of PPM depends on strategic and business alignment..
STRATEGIC PLAN
INPUTS & OUTPUTS
Strategic orientation
Growth objectives
Scenario analysis
Effective and efficient Portfolio Management is the result of creating interdependent linkages between – in order of precedence – the Strategic Plan, Portfolio Plan, and Business Plan such that the outputs from one become the inputs to another.
These plans should be temporally related in an organization. In most organizations, the Business Plan follows the Strategic Plan leaving the Portfolio Plan with both its budget and human resource constraints to ‘figure out’ how the objectives of the Strategic Plan will be met.
PORTFOLIO PLAN
INPUTS & OUTPUTS
Scenario analysis
Portfolio analysis
Portfolio recommendation(s)
BUSINESS PLAN
INPUTS & OUTPUTS
Portfolio recommendation(s)
Investment strategy
Portfolio execution
© Alan C. Maltz, Ph.D, 2014

5. NEEDS OF THE PORTFOLIO STRATEGY
Portfolio Strategies – importance of alignment between objectives and investments..
DEFINE MULTI-PERIOD
GOALS & OBJECTIVES
CORPORATE
OBJECTIVES
For a Portfolio strategy to thrive, it must be intimately connected to both the organization’s overarching corporate objectives and the R&D and business investment strategy. One can view the tiers in the pyramid as semi-permeable membranes where information from any one tier is transmitted to another.
A change in corporate objectives must be reflected by a change in Portfolio strategy which, in turn, will impact the R&D and business investment strategy. Likewise, any proposed change in R&D and business investment strategy must be reflected by a change in the Portfolio Strategy so that its impact on corporate objectives is readily measured.
DETERMINE WHERE AND HOW TO COMPETE IN ACCORDANCE WITH CORPORATE OBJECTIVES
PORTFOLIO
STRATEGY
ALLOCATE RESOURCES
TO BEST FULFILL THE
NEEDS OF THE PORTFOLIO STRATEGY
R&D AND BUSINESS
INVESTMENT STRATEGY
© Alan C. Maltz, Ph.D, 2014

6. Agree or disagree?
The company’s business strategy- and embedded within it, e.g. new product and technology strategy - must drive your portfolio management process and the projects in which you ultimately invest. Strategy and resource allocation must be intimately connected. Strategy becomes real when you start spending money
© Alan C. Maltz, Ph.D, 2014

7. Portfolio-strategy alignment goals
Strategic fit: All active projects are aligned with the business strategy
Strategic contribution: All active projects contribute to achieving the goals and objectives set out in the strategy
Strategic priorities: Resource allocations- across business areas, markets, and project types- truly reflect the desired strategic direction of the business
© Alan C. Maltz, Ph.D, 2014

8. Portfolio-strategy alignment approaches
Top-down – begins with business’s vision, goals, strategy
Bottom-up - Proposals for funding, “bubble-up”
Top-down, bottom-up approach – multiple iterations
© Alan C. Maltz, Ph.D, 2014

9. Top-down: Product roadmap
A series of product or platform developments and their extensions on a time scale
If this is our strategy, then what projects must we or should we do?
The identification of major initiatives and platform developments helps shape the development portfolio
© Alan C. Maltz, Ph.D, 2014

10. Areas of Strategic Focus
The Major Steps in Developing a New Product Strategy…
Market Analysis
New Products
New Solutions:
Major initiatives
Customer solutions
Product roadmap
Platforms
Research programs
Competitive Analysis
Areas of Strategic Focus
Opportunities:
Unmet needs
Problems
Emerging areas
Profit areas
voids
Industry Analysis
Company Analysis
Cooper, p.109
© Alan C. Maltz, Ph.D, 2014

11. P&P Aerators: Hi-Power
Product roadmap
Extension into Chemical Mixers
Original Agitator Platform - Extension
Chemical Mixers: Basic Line
Plan extensions
& new platforms
Chemical Mixers: Special Impellers
Chemical Mixers: Hi-Power
Extension into Petroleum Blenders
Platform Extension
Petroleum Blenders: Low Power Range
Petroleum Blenders: Hi-Power
New Product Platform: Aerators
Aerator Platform
P&P Aerators: Line #1 (fixed mount)
P&P Aerators: Line #2 (floating)
P&P Aerators: Hi-Power
Extension into Aerators for Chemical Waste
Platform Extension
Chemical Aerators: Line #1
Chemical Aerators: Line #2
CEK, p. 122
© Alan C. Maltz, Ph.D, 2014

12. Technology roadmap Derived from product roadmap
Lay out the technologies and technological competencies that are needed to implement the products on the product roadmap
© Alan C. Maltz, Ph.D, 2014

13. Top-down: Strategic bucket
To ensure that where the money is spent represents the business strategy and strategic priorities
How:
The business vision and strategy lead to new product strategy
Management decides where to spend money
Amount of money (bucket) is defined
Projects are then prioritized within bucket
© Alan C. Maltz, Ph.D, 2014

14. Steps in executing strategic bucket
Develop a vision and strategy for the business
Make forced resource allocation choices across key strategic dimensions— Strategic goals, product lines, market segments, technology types, project types, etc.
Define strategic buckets
Determine current spending, desired spending, and gaps
Rank projects by bucket
Make necessary adjustment
© Alan C. Maltz, Ph.D, 2014

15. When strategic bucket is used
Multiple portfolios, one for each bucket = multiple prioritized lists of projects
Dissimilar projects are not compared against each other
Resource spending at the end of the year is inline with target breakdown
© Alan C. Maltz, Ph.D, 2014

16. Projects Prioritized within Strategic Buckets
New Products:
Product Line A
Target Spend:$8.7M
Product Line B
Target Spend:$18.5M
Maintenance of Business:
Product Lines A&B
Target Spend:$10.8M
Cost Reductions:
All Products
Target Spend:$7.8M
Project A 4.1
Project B 2.2
Project E 1.2
Project I 1.9
Project C 2.1
Project D 4.5
Project G 0.8
Project M 2.4
Project F 1.7
Project K 2.3
Project H 0.7
Project N 0.7
Project L 0.5
Project T 3.7
Project J 1.5
Project P 1.4
Project X 1.7
Gap=5.8
Project Q 4.8
Project S 1.6
Project Y 2.9
Project R 1.5
Project U 1.0
Project Z 4.5
Project V 2.5
Project AA 1.2
Project BB 2.6
Project W 2.1
Cooper, p. 128
© Alan C. Maltz, Ph.D, 2014

17. Advantages and disadvantages of top-down approaches …
Aligns with strategic directions
Aligns funding with goals of business
Requires a business and new product strategy
Tough choices in operationalizing the strategy
Strategic baskets requires management to be very specific about wheer to spend
© Alan C. Maltz, Ph.D, 2014

18. Bottom-up: Focus on project selection
Strategic criteria is built into project selection tools
Project selection is a focus
In the process of selecting excellent projects, the portfolio will evolve and spending breakdowns will emerge
Scoring model often used for selection
How to ensure that the spending breakdown in the portfolio reflects the strategic priorities of the business?
© Alan C. Maltz, Ph.D, 2014

19. HYBRID --Top-down, bottom-up
Iterative process
Start with Top-down to set up tentative target breakdowns of spending across categories
Move to Bottom-up to yield a single prioritized list of projects
From the list, create a breakdown using the same categories as the Top-down approach
Check the Bottom-up spending breakdown with Top-down spending breakdown
Merge top and bottom outcomes
© Alan C. Maltz, Ph.D, 2014

20. A Commercial System – Project Prioritization ...
Powersteering© by UPLAND
© Alan C. Maltz, Ph.D, 2014

21. A Commercial System – Alignment …
Powersteering© by UPLAND
© Alan C. Maltz, Ph.D, 2014

22. Class exercise
Create a framework for portfolio evaluation and selection
The framework should include specific processes, tools, techniques, criteria, etc.
Consider 3 goals: Maximization of value, Portfolio balance, and strategic alignment
At what point resource availability should be considered?
© Alan C. Maltz, Ph.D, 2014

23. Thank You - Questions?
Alan C. Maltz, Ph.D. Howe School of Technology Management Stevens Institute of Technology Castle Point on the Hudson Hoboken, NJ 07030
Phone: +1 (561)
Web:
© Alan C. Maltz, Ph.D, 2014